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2007 AEC - Effects of Financial Integration on Financial Development and Economic Performance of the SACU Countries


This paper examines the effects of financial integration on financial development and economic performance of the SACU countries within a country-specific framework. The paper employs four measures of financial integration, two measures of financial development and real per capita output and annual time series from 1970 to 2004 for the analysis. The econometric analyses were carried out using the Johansen cointegration and error correction modelling techniques. The effects of financial integration were mixed, but what is apparent is that countries that are more integrated to South Africa produce more discernible evidence of positive effects of financial integration. The paper attributes the weak gains from the official integration arrangement to weak institutional and structural impediments in the countries.

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